Scenario: Mary and John were trading up to a larger home. Since they had good credit and strong income, they decided to go to “their bank” for a mortgage.
The client interview with their bank salesman went something like this:
“So how much do you want to borrow?”
“$350,000.”
“You want a fixed rate?”
“Yes.”
“OK. No problem.”
After three frustrating months of dealing with different people at their bank, they finally closed. But that’s just the beginning of this story.
PROBLEM: Mary and John needed an extra $100K for home improvements. But their large down payment drained their savings. Mary was considering a 401k loan. Their CPA told them to call Warren Goldberg.
Diagnosis: During my in-depth interview, I learned that John planned to retire in six years and relocate to Arizona. Although Mary had a sizable 401k, her company was experiencing hard times and everyone was fearful of layoffs.
I explained that if Mary took a 401k loan and then lost her job, she would have only 90 days to pay the money back. Otherwise the loan would be considered a withdrawal, with taxes and penalties due. Clearly the 401k loan was not a good idea.
They could easily obtain a Home Equity Line of Credit. However, since the rate on a HELOC is adjustable and tied to the Prime Rate, it’s likely the rate would increase substantially over the next six years, dramatically affecting their cash flow.
Solution: A cash-out refinance that would cover their current mortgage balance, plus all of the home improvements. I showed them how a 7/1 ARM, would provide a lower rate and payment on this new, larger loan, than they had on their current, smaller mortgage!
Result: New mortgage approved, loan closed, and a loyal client for life.
BOTTOM LINE: By choosing to work with “their bank,” Mary and John were sold a mortgage that was totally inappropriate for their needs. They received poor advice, the wrong product, and were paying more in interest than they should have. Despite the fact that they closed, “their bank” left them in a dangerous, cash-poor position, with no money for home improvements. And without emergency cash reserves, if Mary lost her job, they could also have lost their home! Plus, a 401k loan would have resulted in lost opportunity costs (her money can’t grow if it’s not in the account) and at worst, a huge tax bill if she lost her job before the loan was paid off.
The days of “mortgage salesmen” are over. By working with this Certified Mortgage Planning Specialist, you’ll receive the RIGHT mortgage at the right price. You’ll ensure your mortgage complements your financial needs today, and helps you attain your financial goals tomorrow. And guess what? The rates and fees you’ll receive are probably the same or better than if you went to “your bank.”
Warren Goldberg is a Certified Mortgage Planning Specialist and a published author. His interviews include Blog-Talk Radio, Newsday, and the Long Island Herald. Since 1992, he’s been sharing his financial knowledge and wealth-building strategies, including how to properly use your mortgage as a financial tool. His clients regularly express their trust and appreciation by recommending friends and family call when in need of mortgage, real estate, and financial guidance.
Your chances of being arpvoped for a short sale are slim if you are current on mortgage payments. The lender isn’t going to approve a short sale just because your home has lost value. The lender will insist on some sort of financial basis disclosure from you before considering allowing a short sale. If you have other sizeable personal assets, they won’t approve you, and will expect you to pay off the deficiency. Of course, you can cease making payments and head for foreclosure, and that will raise havoc with your credit rating. Unfortunately, so will a short sale.In the event of a foreclosure or short sale, you can expect to be denied future mortgages for a period of from three to five years.